in-cyprus 20 December 2023
The luxurious Cap St Georges hotel in Peyia was allegedly financed by dirty money resulting from the Magnitsky tax fraud case in Russia, according to the Organised Crime and Corruption Reporting Project (OCCRP).
In a report published yesterday, based on leaked files from corporate service providers which make up Cyprus Confidential, OCCRP writes that the controversial resort built upon the Peyia sea caves which host the endangered Mediterranean monk seal, was partly funded by companies owned by figures connected to the notorious Russian tax fraud.
The Magnitsky case
The Magnitsky case derived its name from whistleblower Sergei Magnitsky, who in 2008, exposed a $230 million fraud against the Russian state, funnelled through a network of shell companies.
Magnitsky alleged there had been large-scale theft from the Russian state, sanctioned and carried out by Russian officials. He was arrested and eventually died in prison, in 2009, seven days before the expiration of the one-year term during which he could be legally held without trial.
A human rights council set up by the Kremlin found that he had been physically assaulted shortly before his death.
Dirty Russian money linked to Cap St Georges
“Advertisements and billboards around Cyprus identify the luxe resort’s developer as Korantina Homes, a company owned by Cypriot businessman George Ioannou. But Cap St Georges’ origins are a little more complex — and murky — than its advertisements suggest,” the OCCRP report writes.
According to OCCRP, the resort was developed by a group of companies involving offshore entities, that were connected to the Magnitsky case.
Dmitry Klyuev, the alleged leader of the criminal group behind the Magnitsky tax fraud, was one of the first buyers of a villa at Cap St Georges and appears to have been a shareholder in an investment company behind the resort.
Klyuev, designated by the U.S. government as a person involved in “organised crime,” reportedly held the villa until 2019, transferring ownership to undisclosed individuals.
Another figure in the case is Igor Sagiryan, then president of a financial company who is alleged to have received millions from firms connected to the proceeds of tax fraud. Sagiryan was a founding shareholder of the offshore portfolio company that attracted investors to the Cap St Georges project. The subsidiary of his company owned part of the land where the project was constructed.
Reporters also discovered that Sagiryan owned a Panamanian company that received $2 million in 2008 from two British Virgin Islands companies owned by Klyuev, which themselves had received money from companies named by the U.S. Department of Justice in a civil court case as recipients of proceeds of the tax fraud.
“What you have here is a window into this murky world of criminal and corrupt capital that has left Russia and been distributed in financial havens around the world,” said Louise Shelley, an expert for the U.S. Southern District of New York’s case against Prevezon Holdings, a Cypriot real estate company that allegedly laundered proceeds of the tax fraud.
“Some of this tainted money appears to have been consolidated” in the Cap St Georges real estate development, Shelley added.
The OCCRP investigation also indicates that Silfona Limited, a Cypriot subsidiary of Alpha Arch Investments, owned by Klyuev, held a minority stake in the land on which Cap St Georges was built. Financial irregularities, including discrepancies in Silfona’s valuation methods and loans, raise concerns about potential improprieties during the resort’s early development stages.
In 2015, Alpha Arch’s subsidiaries offloaded Cap St Georges for a substantial 16 million euros to companies owned by Ioannou. Since then, the resort has evolved into a sprawling complex with 200 private villas, a hotel boasting 202 rooms, and accompanying sewage treatment plants.
International pop star Shakira reportedly owns a villa at the resort.
Klyuev did not respond to OCCRP’s request for comment. In an email to OCCRP, Sagiryan confirmed his involvement in the Cap St Georges project but said he divested in 2015 and made a loss on his investment. He said he was not involved with and did not benefit from the events surrounding the Magnitsky fraud.
Ioannou said he had never met or even heard of Klyuev. He said Sagiryan had owned a villa at the resort and had promoted investments into the project, but that neither man “have any financial interests in Cap St Georges.”
Environmental concerns
A 2019 “warning letter” from the European Commission accused Cyprus of failing to carry out an “appropriate assessment” of Cap St Georges.
Ioannou told OCCRP that when developing that area, “we were very cautious in abiding to all enforced regulations including environmental restrictions so that the development will not interfere or harm the natural beauty of the area.” He said that his company, Korantina, and all the companies under it, “always follow all the laws and regulations and we operate with full respect towards all our clients and associates.”
It’s worth noting that from 2016 to 2022, Ioannou’s companies donated at least €170,000 to all parties in the parliament over the last decade, excluding the Green Party.
Ioannou said that all his political donations had been “below the maximum extent of contribution allowed by law” and that each donation was “transparent and is public data.”
Volt Cyprus MP Alexandra Attalides told OCCRP there should be an investigation into whether any donations had secured political favours for the companies and Cap St Georges.
“Clearly this case should be looked into, as to what extent there is a correlation between these donations and the tolerance the state showed to such a blatant violation,” she said.
